By: Jeff Cooper
Hit and Run Morning Stock Report: October 10th, 2022
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On A Knifes Edge
This week is a key week.
If a whoosh is going to occur there is a strong likelihood it is this week.
October 13 we get the CPI and that could act as kind of an electrical bolt in this perfect storm.
When you make a low normally selling pressure disappears and vice versa, but when there is so much uncertainty economically and geopolitically, sometimes all the elements come together like the tumblers on a combination lock and you get a whoosh… a collapse.
This occurs because you get a Come To Jesus moment from the buy the “dippers” who freeze up and refuse to add until they see a washout—an unorderly decline in combination with sellers who have weathered the storm but wonder if this is a generational/secular type bear where the market stays waterlogged for a decade or so like the 1970’s and finally throw in the towel---Catharsis…Capitulation.
My concern is the 2022 decline has been orderly and that it may take a disorderly drop, which is much greater than the vast majority perceive is possible to achieve a genuine Selling Climax. In other words, pure panic.
Let’s examine some of the factors that make this a key week at key levels.
First of all W D Gann wrote that anniversary dates were very important.
These are not voodoo technicals but based on the solar return…not astrology, but mathematical cycles.
There is a big difference between the cycles of the planets and an astrological aspect.
Although Gann was an astrologer he wrote that math is more important than astrology.
For example, the bear market low in 2002 was October 11.
The Panic of 1907 occurred from October 14th to November 6th.
That was 115 years ago.
On the Square of 9 the number 115 is square October 4th.
When you’re dealing with that much time, the month OF becomes the window to watch.
It is 58 years from 1929 to 1987.
On the Square of 9 the number 58 is square October 29th.
In other words, if in the summer of 1987 you had recognized the similarities in the pattern with 1929 as did Paul Tudor Jones, and you had a Square of 9 Wheel you might have said to yourself, there is a vibration this year with October 29th, the big crash in 1929.
From 1929 to 2022 is 93 years.
On my Square of 9 Wheel, 93 is virtually one full square up from 58.
93 squares October 24th, the first of the two great crashes in October 1929.
There is an inextricable relationship between the patterns and vibrations in 1929 and 1987 that go well beyond the above that I have outlined for subscribers.
From 1987 to 2022 is 35 years.
35 is square December 1st.
Theoretically, the Danger Zone is open through November 2022 for this Intermediate Term leg of the bear market.
Last month I walked through how November ties to the two greatest lows in the U.S. stock market in 1842 and 1932.
Mid-November ties to the closing low in 1929 while early December ties to the closing low in 1987 and as offered above the low of the Panic of 1907.
Let’s take a look at the Price.
The all-time SPX high is 4818.
Moving a decimal point and rounding off we get 482.
360 degrees down from 482 is 398 or 3890.
The SPX went into free fall when it broke below 3980 on September 13th.
540 degrees below 482 is 359 or 3590.
The low for the SPX this year is 3585 which occurred on September 30th.
Mr. Market respected that key square-out of 540 degrees with two back-to-back large breadth rally days to kick off October…just like in early 1987.
That could have been a successful test of the mid-June low.
Could have been; however, the market rolled over hard on Friday violating a trifecta of technicals flagged in the low 3700 region in this space and on the Hit and Run Private Twitter Feed.
In so doing the SPX left a continuation Island Top.
As well the SPX looks like a large inverse Cup and Handle (bearish) from mid-June with the rally off the September 30th low being the Handle.
Breakage below the key 3585 (540 degrees down from the “482” all-time high) could open the floodgates.
The next “square” down ties to 341 or 3410 SPX.
But the more important square down is 322 which is 3220.
This is a full 720 degrees or two cycles of price down from the 382 ATH.
This ties to the Covid Breakaway Gap in February 2020
Last week we used a monthly DJIA showing the average had probed below the February 2020 peak and its 50 month moving average but recaptured it…until rolling over late last week.
If the DJIA sees downside follow-through in tandem with the SPX snapping 3585 with authority, the wheels could come off.
In sum, we are on a knife edge in the eye of a perfect storm where Time, Price, and Pattern are dovetailing echoing 1907, 1929, 1987, and 2008.
Maybe a collapse doesn’t happen but I doubt it.
If indeed we get a wash-out before the end of October, the time period into mid-November warrants caution as well for a second plunge.
The idealized level for a washout in the DJIA is 25,000-26,000.
